by satishhaligeri@gmail.comLast Modified: January 10, 2018

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Karnataka Class 12 Commerce Economics Positive And Normative Economics : Karnataka Secondary Education Examination Board came in to existence in the year 1966, has been conducting SSLC and other examinations. Every year the studentstrength is increasing tremendously. Every year in April about 8.50 Lakhs & in June 1.50 Lakhs students are appearing for the SSLC examinations.

The board has decided to improve the evaluation system and the results, has set up divisional offices of the Board. This decentralization caters to the need of the student needs at their proximity. The board is now providing Admission Tickets with student photographs and major breakthrough in this venture is the photos being used in the repeaters Admission Tickets also.

Karnataka Class 12 Commerce Economics Positive And Normative Economics : Each of us must have an understanding on how the economy works. It will allow us to see if our policy makers are making the right economic decisions for us. We should be able to know how our behavior and spending habits affect the economy.It is important therefore to know what economics is and learn about its different features and dimensions.

Microeconomics examines the behavior of the consumers, producers, buyers, and sellers.

Economic theory – provides a research outlet of economics with the use of theoretical reasoning and mathematical solutions.

Applied economics – application of economic theory

Rational economics – formulation of a framework the understanding of economic behavior.

Behavioral economics ï¿½ uses social and emotional factors in understanding the decisions of individuals and business entities in the performance of their economic functions.

Positive Economics : Positive economics is the study of what and why an economy operates as it does. It is also known as Descriptive economics and is based on facts which can be subjected to scientific analysis in order for them to be accepted. It is based on factual information and uses statistical data, and scientific formula in determining how an economy should be. It deals with the relationship between cause and effect and can be tested. Positive economic statements are always based on what is actually going on in the economy and they can either be accepted or rejected depending on the facts presented.

Normative Economics : Normative economics is the study of how the economy should be. It is also known as Policy economics wherein normative statements like opinions and judgments are used. It determines the ideal economy by discussion of ideas and judgments. In normative economics, people state their opinions and judgments without considering the facts. They make distinctions between good and bad policies and the right and wrong courses of action by using their judgments. Normative economic statements cannot be tested and proved right or wrong through direct experience or observation because they are based on an individualï¿½s opinion. Although these two are distinct from each other, they complement each other because one must first know about economic facts before he can pass judgment or opinion on whether an economic policy is good or bad.

Summary

1. Positive economics deals with what is while normative economics deals with what should be. 2. Positive economics deals with facts while normative economics deals with opinions on what a desirable economy should be. 3. Positive economics is also called descriptive economics while normative economics is called policy economics. 4. Positive economic statements can be tested using scientific methods while normative economics cannot be tested.

Karnataka Class 12 Commerce Economics Positive And Normative Economics : Positive and normative economic thought are two specific branches of economic reasoning. Although they are associated with one another, positive and normative economic thought have different focuses when analyzing economic scenarios.

Positive Economics

Positive economics is a branch of economics that focuses on the description and explanation of phenomena, as well as their casual relationships. It focuses primarily on facts and cause-and-effect behavioral relationships, including developing and testing economic theories. As a science, positive economics focuses on analyzing economic behavior. It avoids economic value judgments. For example, positive economic theory would describe how money supply growth impacts inflation, but it does not provide any guidance on what policy should be followed. “The unemployment rate in France is higher than that in the United States” is a positive economic statement. It gives an overview of an economic situation without providing any guidance for necessary actions to address the issue.

Normative Economics

Normative economics is a branch of economics that expresses value or normative judgments about economic fairness. It focuses on what the outcome of the economy or goals of public policy should be. Many normative judgments are conditional. They are given up if facts or knowledge of facts change. In this instance, a change in values is seen as being purely scientific. Welfare economist Amartya Sen explained that basic (normative) judgments rely on knowledge of facts.

An example of a normative economic statement is “The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm. ” It is a normative statement because it reflects value judgments. It states facts, but also explains what should be done. Normative economics has subfields that provide further scientific study including social choice theory, cooperative game theory, and mechanism design.

Relationship Between Positive and Normative Economics

Positive economics does impact normative economics because it ranks economic policies or outcomes based on acceptability (normative economics). Positive economics is defined as the “what is” of economics, while normative economics focuses on the “what ought to be. ” Positive economics is utilized as a practical tool for achieving normative objectives. In other words, positive economics clearly states an economic issue and normative economics provides the value-based solution for the issue .

Karnataka Class 12 Commerce Economics Positive And Normative Economics : It is important therefore to know what economics is and learn about its different features and dimensions. Economics is a social science that deals with the production, distribution, and consumption of goods and services. Its purpose is to explain how economies work and the interaction between its various agents. There are several dimensions of economics, namely:

Positive Economics

Positive economics is the study of what and why an economy operates as it does. It is also known as Descriptive economics and is based on facts which can be subjected to scientific analysis in order for them to be accepted.

It is based on factual information and uses statistical data, and scientific formula in determining how an economy should be. It deals with the relationship between cause and effect and can be tested.

Positive economic statements are always based on what is actually going on in the economy and they can either be accepted or rejected depending on the facts presented.

1. Positive economics deals with what is while normative economics deals with what should be.

2. Positive economics deals with facts while normative economics deals with opinions on what a desirable economy should be.

3. Positive economics is also called descriptive economics while normative economics is called policy economics.

4. Positive economic statements can be tested using scientific methods while normative economics cannot be tested.

Normative Economics

Normative economics is the study of how the economy should be. It is also known as Policy economics wherein normative statements like opinions and judgments are used. It determines the ideal economy by discussion of ideas and judgments.

In normative economics, people state their opinions and judgments without considering the facts. They make distinctions between good and bad policies and the right and wrong courses of action by using their judgments.

Normative economic statements cannot be tested and proved right or wrong through direct experience or observation because they are based on an individual opinion.

Difference

Karnataka Class 12 Commerce Economics Positive And Normative Economics : Whenever you are reading articles on current affairs it is important to be able to distinguish between objective and subjective statements

What are positive statements?

Positive statements are objective statements that can be tested, amended or rejected by referring to the available evidence. Positive economics deals with objective explanation and the testing and rejection of theories. For example:

A fall in incomes will lead to a rise in demand for own-label supermarket foods

If the government raises the tax on beer, this will lead to a fall in profits of the brewers.

The rising price of crude oil on world markets will lead to an increase in cycling to work

A reduction in income tax will improve the incentives of the unemployed to find work.

A rise in average temperatures will increase the demand for sun screen products.

Higher interest rates will reduce house prices

Cut-price alcohol has increased the demand for alcohol among teenagers

A car scrappage scheme will lead to fall in the price of second hand cars